Dollar rises from 3-week low; sterling edges lower

The dollar crept higher on Wednesday, a day after dropping to a three-week low against a basket of major currencies amid a repricing of expectations of U.S. Federal Reserve rate increases and concerns about U.S. President Donald Trump's ability to deliver a promised fiscal boost.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.26 percent at 99.757. It fell to a low of 99.465, its lowest since March 28, on Tuesday.

"You are seeing a little bit of a relief rally today, but it is really nothing compared to the weakness we have seen in the dollar over the last three to four weeks," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

U.S. rate repricing, on the back of weaker-than-expected economic data, and worries about the Trump administration's ability to achieve tax and fiscal reforms, have hurt the dollar in recent weeks, Trang said.

Futures traders were pricing in a 49 percent chance the U.S. central bank will raise rates at its June meeting, down from 71 percent on April 6, according to the CME Groups FedWatch Tool.

"These expectation have been built in over the last three months and people are basically paring back a little bit of those speculations that these policy changes can be made," Trang said.

On Wednesday, U.S. Treasury Secretary Steven Mnuchin was quoted saying in the Financial Times that Trump is "absolutely not" trying to talk down the strength of the U.S. dollar, playing down remarks by Trump in an interview last week when he said the dollar was "getting too strong."

The greenback was 0.54 percent higher against the yen and up 0.17 percent against the euro.

The euro reached a near-three-week high against the dollar on Tuesday, but with the first round of France's presidential election just four days away and polls showing just a few percentage points separating the top four candidates, analysts said gains in the euro would be capped.

Meanwhile, sterling edged lower after rising to a six-and-a-half month high against the dollar on Tuesday, after British Prime Minister Theresa May called a snap election for June, saying it would strengthen Britain's hand in negotiations with the EU. Sterling was down 0.19 percent at $1.2811.

The Aussie, the Canadian dollar and the New Zealand dollar slipped against the greenback because of weakness in commodity markets, Silicon Valley Bank's Trang said.